If we talk about venture capital operations, we can refer to the financing received by a company that is in a growth or high-risk stage. It is a financial activity that channels and manages money raised from investors to these companies, which normally have some difficulty in accessing other sources of financing. Venture capital firms can only take equity stakes in companies on a temporary basis. Their main objective is to increase the value of these companies and obtain a subsequent profit.
Before venture capital operations take place, a prior assessment of the business plan of the companies presented is carried out. In addition to a tax, accounting and legal audit of the company. The Investment Committees of the venture capital firms will advise on the advisability of taking stakes in the target companies.
According to the profile of the investment, the different venture capital firms may invest at different stages of the company’s growth. In this regard, and in very general terms, the market distinguishes three stages of company growth that should be assessed. Seed (or startup) stage – typical situation of any startup -. Consolidation – these would be companies that start marketing their product or service and need to consolidate. And expansion – which would be an already consolidated company that needs to grow to gain value. In the first case, it is a matter of financing the previously designed business plan. In the second case, to finance the leap to the market and the consolidation of the company. And in the third, to finance the growth and expansion of the company. The venture capital entities will provide the company with the financial resources it needs at that time – according to the approved business plan – via capital or soft loans, and over a medium to long term. All this with the ultimate goal of increasing its value in the market and standing out from the competition.
One of the major contributions of venture capital operators to the environment is the promotion of economic development. By supporting companies in a period of growth, consolidation or expansion, they encourage entrepreneurship in the market and job creation. It also cooperates with the innovation and technological evolution of professional sectors. Venture capital activity in Spain is regulated by Law 22/2014, of November 12.